The Seattle skyline looking north from Lumen Field on Sept. 10, 2023. (GeekWire Photo/Kurt Schlosser)
Seattle Mayor Bruce Harrell wants to make it easier for property owners to convert commercial buildings into residential use, citing a volatile commercial real estate market and the threat of declining city tax revenues.
Mayor Harrell introduced a new bill to the City Council on Thursday that includes exemptions and cost reductions to ease the process of converting offices to residential properties.
“We know that demand for office space remains, but this effort gives us the flexibility to optimize the built environment and create the downtown we want – a vibrant workplace and thriving community for families and residents of all backgrounds,” Harrell said in a statement. “These changes are an important step in making the idea of office conversion a reality.”
The implementation of hybrid working policies has led to a significant decline in commercial real estate asset values.
“But the losses aren't just hitting commercial real estate investors,” The New York Times reported Thursday. “Cities are starting to feel the pain, too, as local budgets that rely on taxes tied to valuable commercial property now face shortfalls and are considering cuts as falling property assessments reduce taxes.”
Comparing smartphone location data from pre-pandemic 2019 to current levels, Seattle still ranks near the bottom of U.S. city downtown resurgence rankings. Seattle's downtown office vacancy rate is double what it was in 2019.
This trend is driven in part by Seattle's strength as a tech hub, allowing many companies headquartered downtown, including F5, Zillow, DocuSign and Qualtrics, to easily rely on remote work.
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The City of Seattle itself has a hybrid work policy, requiring city executive branch employees (city offices and departments) to come into the office at least two days per week, except for employees supporting essential functions or those who have been approved for alternative arrangements.
Harrell is concerned about declining tax revenue.
“I'm trying to encourage employers to bring their employees back and create the energy and synergy that's needed,” Harrell said at the GeekWire Summit in October 2022. “But the reality is, the good old days when everyone worked downtown are never going to come back.”
City leaders are considering using revenue from a Jump Start payroll tax on companies like Amazon to help close a $230 million budget deficit, The Urbanist reported this week.
The mayor is positioning the proposed office building renovation as a way to also tackle the problem of rising housing prices.
“Following the recent passage of a state sales tax exemption for construction for projects that convert nonresidential space into housing, this bill is another powerful tool to address the housing crisis and replace empty building space with vibrant new ones,” Harrell said in a statement.
The city held a competition last year for ideas to convert downtown office space into housing and announced the winner in June.
Last week, Governor Harrell proposed changes to zoning rules to allow for greater density in neighborhoods and more corner shops.
See Harrell's full office renovation proposal below.
Seattle Mayor Proposes Bill to Convert Commercial Properties to Residential Use, GeekWire on Scribd